UPDATE 1-Morgan Stanley boosts CEO salary, eyes higher returns

NEW YORK, Jan 31 (Reuters) - Morgan Stanley said it
is nearly doubling Chief Executive James Gorman's salary to $1.5
million a year, to bring it more in line with other big bank
chiefs.

Gorman's total pay for 2012 fell 7 percent to $9.75 million,
the bank said in a regulatory filing Thursday, putting him on
the lower end of the range for big banks that have reported
figures so far.

But his salary for 2013 is rising from $800,000 the prior
year, following a trend widely seen on Wall Street of higher
base pay and lower bonuses. The shift, encouraged by new
regulations, is meant to make executives less inclined to take
big risks to win outsized bonuses.

Gorman's new salary amounts to about $28,846 per week,
compared with $38,462 per week for Lloyd Blankfein, who is CEO
of Morgan Stanley's chief Wall Street rival, Goldman Sachs Group
Inc. The five CEOs running U.S. banks larger than Morgan
Stanley had base salaries last year ranging from $950,000 to
$2.8 million.

Gorman faces a big task for 2013: boosting returns for a
bank that has lagged peers, in large part because of high
expenses in its wealth management group and relatively low
revenue in its bond trading business.

Morgan Stanley's return on equity, a measure of how well the
bank squeezes profit out of shareholders' money, was just 3.2
percent in the fourth quarter, far below the double-digit
returns of competitors.

Earlier this month, Gorman pledged that Morgan Stanley would
be able to deliver a 10-percent return on equity for
shareholders, even if market conditions do not improve. After
achieving that goal, Morgan Stanley will return excess capital
to shareholders, he said.

The 10 percent figure is about equal to the bank's cost of
capital, making it a bare minimum figure that many shareholders
will stomach.

Morgan Stanley also approved a performance-based award
package that makes Gorman eligible to earn $3.75 million over
the next three years, if certain return targets are met. In
2009, Gorman got nothing from that package because Morgan
Stanley missed its targets for return-on-equity and relative
total shareholder returns over the period.

C. Robert Kidder, Morgan Stanley's independent lead director
said: "The Board is confident of the strategic decisions taken
by senior management and our decision to grant these
forward-looking (long-term incentive program) awards reflects
that confidence."

Much of Gorman's bonus is deferred. Across the bank, except
for among retail brokers, high-earning employees are receiving
their bonuses over three years.

Even with the bank's difficulties, its stock climbed 26
percent during 2012, and has soared another 19 percent this
year, to close at $22.85 on Thursday.

The board's compensation committee also approved higher base
salaries for Chief Financial Officer Ruth Porat, as well as
Gregory Fleming, who is president of Morgan Stanley's global
wealth management and investment management businesses, and for
Colm Kelleher, who is president of institutional securities.
Those three executives will take home a base pay of roughly $1
million in 2013, up from a previous level of about $750,000.